While January’s credit card purchases data showed an easing on the month AUD exchange rates still found some measure of support at the start of the week. This was largely due to news that Australia will be granted an exemption from new US tariffs on steel and aluminium, a major boon to the country’s mining sector. As market risk appetite picked up somewhat, thanks to the mixed nature of Friday’s US jobs data, the pressure on the Australian Dollar eased.
Even so, today’s home loans and NAB business confidence index results could still set the ‘Aussie’ on a fresh downtrend, as optimism in the Australian economy remains limited.
In another negative sign for the UK outlook, Visa reported that domestic card spending had continued to contract in February. With spending down a further -1.1% on the month this suggests that consumers are increasingly reining in their finances, likely in response to Brexit-based uncertainty and higher inflation. Even so, the Pound was soon able to shake this weaker result off as markets started to brace for Chancellor Philip Hammond’s spring statement.
Even if the Office for Budget Responsibility forecasts are revised higher, however, Sterling may not be able to make particular gains thanks to a lack of fresh policy action.
Even though Eurozone finance ministers adopted a generally optimistic tone ahead of their latest Eurgroup meeting this failed to particularly shore up EUR exchange rates overnight. While Greece remains on track to successfully exit its bailout program later in the year the mood towards the single currency remained rather muted. A significant degree of uncertainty still hangs over the future of the currency union, especially if a trade war does break out with the US.
Confirmation that Spanish inflation picked up in February is unlikely to be enough to give the Euro a rallying point today.
An uptick in February’s US consumer inflation expectations was not enough to support USD exchange rates at the start of the week. While this could encourage the Federal Reserve to take a more hawkish view on monetary policy the US Dollar was weighed down by a general uptick in market risk appetite. With reaction to the Trump administration’s heavy tariffs diminishing the upside potential of the US Dollar was naturally limited, with trade war fears temporarily easing.
Tonight’s US consumer price index data may offer USD exchange rates a boost, though, if inflation is found to have accelerated in February.
Signs of increasing disunity within OPEC put renewed pressure on oil prices yesterday, with members disagreeing over what price the cartel should be aiming for. Saudi Arabia and Iran fundamentally disagree over whether US$70 a barrel or US$60 a barrel is the sustainable price at which US production remains relatively limited. The threat of a breakdown within the group raises the risk for the oil market as a whole, to the detriment of the commodity-correlated Canadian Dollar.
Any dovish comments from Bank of Canada (BOC) Governor Stephen Poloz could see CAD exchange rates pushing lower still tonight.
Improved market sentiment offered support to the New Zealand Dollar on Monday, although the antipodean currency struggled to push significantly higher against its rivals nevertheless. Easing global tensions may not support NZD exchange rates for long, given the rather volatile nature of the Trump administration. A lack of fresh domestic data also served to limit the appeal of the ‘Kiwi’ at this stage.
If February’s food price index weakens, pointing towards softer domestic inflation, the mood of NZD exchange rates could sour.
March 13th 07:45 NZD Food Price Index (MoM) (FEB)
March 13th 10:30 AUD Home Loans (MoM) (JAN) -0.2%
March 13th 22:30 USD Consumer Price Index (YoY) (FEB) 2.2%
March 14th 00:30 CAD Bank of Canada Governor Poloz Speaks
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